Credit Scores 101: What Really Impacts Your Score (and What Doesn’t)

Your credit score plays a major role in your financial life—impacting your ability to rent an apartment, get a car loan, qualify for a mortgage, or open a premium credit card. But despite how important it is, credit scores are often misunderstood. Let’s break down what really matters—and what doesn’t—so you can take control of your score with confidence.

What Actually Impacts Your Credit Score

1. Payment History (35%) This is the most important factor. Lenders want to know you pay your bills on time. Even one missed payment can hurt your score—especially if it's more than 30 days late and gets reported.

Tip: Set up autopay or calendar reminders to ensure you never miss a payment.

2. Credit Utilization (30%) This refers to how much of your available credit you’re using. A good rule of thumb: keep your balances below 30% of your total credit limit—but the lower, the better.

Tip: Pay off your cards early or more than once a month to reduce your reported balance.

3. Length of Credit History (15%) Lenders like to see a long, established history of responsible credit use. That’s why keeping old accounts open—even if you don’t use them often—can help.

Tip: Don’t close your oldest cards unless there’s a strong reason (like a high annual fee and no value).

4. Credit Mix (10%) Your score can benefit if you show you can handle different types of credit (like credit cards, auto loans, student loans, etc.).

Tip: Don’t go out of your way to take on new types of debt, but know that having a mix helps.

5. New Credit / Hard Inquiries (10%) Every time you apply for a new credit card or loan, it can cause a small, temporary drop in your score due to a hard inquiry.

Tip: Space out credit applications and only apply when it makes strategic sense.

What Doesn’t Impact Your Credit Score

1. Your Income While lenders care about your income for approval, it doesn’t directly affect your score.

2. Your Savings or Net Worth You could have $100,000 in the bank, but if you’ve never used credit or have a poor repayment history, your score could still be low.

3. Rent Payments (usually) Unless your landlord reports your rent to the credit bureaus (which is rare), your rent payments don’t typically affect your score. Some third-party services can help with this if you want rent included.

4. Debit Card Use Debit cards are tied to your bank account, not your credit report—so using them doesn’t help (or hurt) your score.

Final Thoughts

Improving your credit score isn’t magic—it’s strategy. Pay on time, use only a small portion of your available credit, and avoid opening too many accounts at once. Over time, these habits will pay off—literally.

If you're aiming for better rewards cards, higher credit limits, or more financial flexibility, your credit score is a key tool. Start managing it like the asset it is.